Venezuela sees U.S. shale boom as bonus for own oil industry

LONDON (Reuters) - Venezuela wants to increase oil supplies to the United States to regain some of the market share it lost over the past decade as Caracas sees the U.S. boom in light oil from shale as a chance to raise heavy-crude exports, the country’s oil minister said.

Rafael Ramirez, economy vice president and oil minister, also said Venezuela was working on borrowing $4 billion from China guaranteed by oil sales.

But Venezuela’s total debt to Beijing stood at below $20 billion, he said, much lower than market estimates of over $40 billion.

Venezuela has gone from being the top U.S. supplier at the end of the 1990s to No.4 behind Canada, Saudi Arabia and Mexico as its own output stagnated, U.S. production rose thanks to shale and relations between Washington and Caracas hit new lows.

But Ramirez said his country, the world’s largest holder of oil reserves on the back of heavy-oil discoveries in the past decade, would remain a major supplier to the United States in decades to come.

“We always expect to maintain our current exports to the U.S. and even increase them. As a matter of fact, the shale oil has been a great opportunity for us,” Ramirez said in an interview after he met investors and bankers in London last week.

“Now the U.S. has a huge amount of light oil that has to be blended with extra heavy crude - unless they decide to change all the refining parts they have on the East Coast. And it is clear that won’t be possible in the short term,” he said.

Venezuelan oil output has been stagnant in recent years due to severe pressure on state oil company PDVSA to prop up the socialist economy.

With inflation at 60 percent, President Nicolas Maduro, heir to the late socialist leader Hugo Chavez, is being forced to launch economic reforms and weaken currency controls while facing lower approval ratings.

With debt costs rising, the country is looking to extend maturities on its borrowings.

Ramirez promised new foreign exchange and fuel market reforms to the investors, including holders of Venezuelan bonds, who are keenly watching PDVSA’s supplies and debt profile as the biggest borrower in the country.

CHINESE DEBT

PDVSA in recent years has diversified oil supplies to Asia, shipping 640,000 barrels per day to China and 400,000 bpd to India, compared to 1.2 million bpd to the United States, Ramirez said.

“For 100 years our sole market was the American market,” Ramirez said. “People ask ‘why China, why India?’ Like (former U.S. President Bill) Clinton used to say - it’s economics”.

China has provided tens of billions of dollars in credits to Venezuela, guaranteed by oil supplies, but Ramirez said the amount of loans was much lower than the market thought.

He said China had provided $41 billion so far but some $24 billion had been repaid. That leaves the outstanding debt at around $17 billion.

Ramirez said the country was looking to raise an extra $4 billion from China before the year-end and described relations with Beijing as “perfect”.

Venezuela hopes to refine larger volumes of its heavy oil at refineries in China and India as those countries are building sophisticated plants. Ramirez also said PDVSA had no plan to offload its refining assets in the United States.

He said he believed his country would ultimately reform its heavily subsidized fuel market, although this would take years.

“In the past you could not even raise this issue ... Based on our estimates, there is a consensus in the country and people realize we cannot continue losing $12 billion a year (due to subsidies).”

He did not believe the U.S. shale boom would weaken OPEC even though the oil-producing cartel faced unrest and production problems.

“Shale oil production will have a peak. There is no way the shale oil could destroy OPEC,” he said.